What drives markets right now?
Phil Town reminded us in his last post about an important market fact:
“The price of a business is all about the buyer and seller’s joint agreement on the near term future. If it looks rosy to both, the price will be high. If not, not so much.”
In this context he differs between a value driven market and a price driven market: “at 6600 I said it’s about value. The market was going to go up because price is not value and the value was quite a lot higher than the price. At 9800, the price is up so now it’s about price and price is about ‘as you are’.”
And I agree with this. The last time we had a terrific rally, at some point, we may have left some economic facts behind us. Many companies could only produce better numbers because of downsizing and saving radically. We haven´t left those dangerous grounds. The question is how long will the market participants remain positive?
After the earnings season, the only thing left for a further climbing market is christmas spending.
Which companies can sell much and do people want to spent a lot of money this year?
Once again, markets have come a long way but this is not a one way street. If the economy can not follow we will come back so we have to make sure, that our stops are in place and that we stick to those stops.
Check the risk in your account because the market movement becomes more fragile and we don’t want to lose all our gains or take to much loss.
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